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ILCU response to Credit Union PRISM Supervisory Commentary Report

Posted on: 08 Sep 2020

The Irish League of Credit Unions (ILCU) welcomes today’s publication of the annual Credit Union PRISM Supervisory Commentary Report. As noted by the Central Bank, the report is intended to be a practical reference tool for all credit union boards and management teams to support enhancement of governance, risk management and operational frameworks.  

Today’s PRISM commentary, issued annually, is based on 86 inspections carried out by the Central Bank on credit unions under the PRISM regulatory framework during 2019. After each inspection, a Risk Mitigation Programme (RMP) is issued to the credit union.  This sets out what improvements the credit union should make in order to address any issues raised. 

It is positive to note that the Central Bank acknowledge evidence of improvements in governance frameworks in some credit unions. However, the report did note that there remained issues across governance, credit, operational risk and business model risk. The ILCU will be working with and supporting our affiliated credit unions in making improvements in these areas. 

In order to help address Business Model Risk, the ILCU have established a Mortgage Hub to provide expertise and to assist credit unions to grow their mortgage lending. The ILCU have also recently partnered with the SBCI to assist credit unions to avail of the COVID-19 Credit Guarantee Scheme 

The report highlights that risk issues identified in relation to investments, liquidity and capital were low at 2%, 1% and below 1% respectively.   

The ILCU acknowledge that COVID-19 has presented unprecedented challenges for all credit unions, as today’s report states. However, it should be borne in mind that credit unions went into the COVID- 19 crisis in a position of strength: 

  • Prior to COVID-19, loan arrears in ILCU credit unions had fallen every quarter for a full 8 years (i.e. 32 consecutive quarters of falling arrears).  Prior to COVID-19, loan arrears among ILCU credit unions were at a 17 year low. 
  • Since the arrival of the pandemic, arrears have ticked up in the quarters to March and June 2020, but loan arrears overall remain below 5% of the total loan book. 
  • ILCU credit unions have been in a position to reduce loan provisions in recent years, but have started to adjust up loan provisions as part of their regular loan book reviews. Credit unions will be closely monitoring and reviewing arrears going forward as the impact of COVID-19 is felt, and adjusting up loan provisions as appropriate. 
  • ILCU credit unions had €2.61 billion in capital set aside at the end of June 2020, with surplus capital of €934 million above regulatory requirements. 

The ILCU and our affiliated credit unions will, as always, review this report, take any findings on board, and work to continue to make improvements going forward in the interests of our credit union members.